A comprehensive analysis of Walmart Vs Amazon

Requirements:

1. Download the annual reports for each company and peruse them. Use the SEC EDGAR website to locate the recent Form 10-k. Download a spreadsheet version of financial statements. Use Appendix 1A as a guide.

2. Use the annual report and the financial statements, along with any websites, to assess the companies’ business environment. Use a SWOT analysis to briefly analyze the competitive landscape for the two companies. The aim is to understand the competitive position of each company so we can assess their financial statements in a broader business context.

3. Explore the financial statements, and familiarize yourself with the company basics. The following give an indication of some questions that guide us as we look for answers.

– What accounting standards are used, U.S. GAAP, IFRS, or other?

– What is the date of the most recent fiscal year-end?

– Determine the relative proportion of short- and long-term assets.

– Determine the relative proportion of liabilities and equity.

– Calculate the return on assets (ROA) for the most recent year. Disaggregate ROA into the two component parts as shown in Exhibit 1.7. Compare the numbers/ratios for each company.

– Find the companies’ audit reports. Who are the auditors? Are any concerns raised in the reports? Do the audit reports differ significantly from the one for Apple Inc in Exhibit 1.10?

4. Balance Sheet Analysis. Prepare a common-size balance sheet. To facilitate this, obtain the balance sheet in spreadsheet form from the SEC website at the “Interactive Data” link on the search results page. Look for major differences over time. Some questions to consider:

– What are the company’s largest assets? Largest liabilities?

– What proportion of total assets is financed by owners? (Hint: Compare with total equity.)

– What proportion of total assets is financed by nonowners?

5. Income Statement Analysis. Prepare a common-size income statement. Express each item on the income statement as a percent of total sales or revenue. Do this for all years on the income statement. Look for major differences over time and between the companies. Do any patterns emerge? Some questions to consider:

– What are the major expenses?

-Are there any unusual or discontinued items? Are they large in magnitude?

– Was the company more or less profitable when compared with the prior year?

6. Statement of Cash Flows Analysis. Determine the size and direction (cash source or use) of cash flows from operations, investing, and financing. One goal is to understand the company’s pattern of cash flows and to form an opinion about the general strength of its cash flows. Some questions to consider:

– What were the cash flows from operations? Were they positive?

– Were operating cash flows smaller or larger than net income?

– Did the company generate or use cash from investing activities?

– Did the company generate or use cash from financing activities?

7. Market Capitalization. Determine the market capitalization at the most recent year-end. Determine the number of shares outstanding from the balance sheet. Recall that shares outstanding is total shares issued less any treasury shares. Obtain the year-end stock price from an investment website such as Seeking Alpha or Yahoo Finance. Compare market cap with the book value (total equity) of the company.

8. Compute ROE for the most recent year reported on the income statement. (Hint: Do your companies report noncontrolling interest on the income statement and balance sheet? If so, make certain to use income available to the controlling interest (NICI) in the numerator and equity of the controlling interest (CI) in the denominator.)

9. Compute RNOA and its two components (NOPM and NOAT) for the most recent year reported on the income statement. Examine the income statements and balance sheets to determine the operating and nonoperating items. Please use 22% as statutory tax rate for both companies. (Hint: Use an online source to understand any line items not described in the textbook.) Compare ROE and RNOA and identify differences between the companies. Evaluate the companies’ returns and answer questions such as the following: o Which company is more profitable? o How do the operating and nonoperating portions of ROE compare?